WEEKLY BRIEF | Gold’s Quiet Bear Market

Hello, and welcome to the IVA Weekly Brief for Wednesday, October 14.

There are no changes recommended for any of our Portfolios.

Bonds have been getting a lot of bad press lately. I understand why. With bond yields rising, bond prices are falling, and Total Bond Market ETF (BND) is off 2.1% this year.

What’s not in the headlines, but should be? Gold.

The shiny metal’s price crossed above $5,000 for the first time in January. With gold up nearly 100% over the prior 12 months, investors asked whether they should sell bonds to buy gold. 

Gold is trading around $4,100 an ounce today—23% below its January 29 peak. Yes. Gold is in a bear market (a drop of 20% or more from a prior high).

Since that January peak, we’ve seen war break out in the Middle East, oil supplies get disrupted, inflation rise and uncertainty around mid-term U.S. elections come to the fore. All reasons traders might flock to, not run from, gold.

Over that same period, Total Bond Market ETF is off 2.4% (including distributions). Anyone who swapped bonds for gold at the January peak would be down roughly 20 percentage points more than if they’d simply sat tight.

As I’ve said when evaluating gold’s role in a portfolio, the metal doesn’t always behave as you’d expect, which makes it hard to own.

Delayed Again

Vanguard has, once again, delayed the launch of the Emerging Markets Bond Active ETF (VEMB). Originally slated to debut in September, the actively managed ETF is now tentatively scheduled to start trading around November 9.

Vanguard has made a habit of pushing back ETF launches. For example, Vanguard’s foreign growth and value index ETFs (VDG and VDV) were delayed earlier this year, but eventually arrived. This one will, too.

For ETF investors, it’ll be worth the wait. The new ETF will mirror the legacy Emerging Markets Bond (VEMBX) mutual fund, which—as I recently told Premium Members—is one of Vanguard’s best foreign bond funds.  

Our Portfolios

Our Portfolios are showing solid gains for the year through Tuesday. The Aggressive Portfolio is up 13.6%, the Aggressive ETF Portfolio is up 12.4%, the Growth Portfolio is up 12.6%, the Moderate Portfolio is up 11.5% and the Conservative Portfolio is up 7.0%.

This compares to a 14.7% gain for Total Stock Market Index (VTSAX), a 12.6% return for Total International Stock Index (VTIAX), and a 2.1% decline for Total Bond Market Index (VBTLX). Vanguard’s most aggressive multi-index fund, Target Retirement 2070 (VSNVX), is up 12.4% for the year, and its most conservative, LifeStrategy 20/80 (VASIX), is up 1.4%.

IVA Research

Are muni bonds right for you? Yesterday, I laid out a simple test for Premium Members—along with my ratings on every Vanguard tax-free bond fund.

Until my next IVA Weekly Brief, have a safe, sound and prosperous investment future.